"Everybody (on Wall Street) wants to be an optimist," says Kathy Boyle, president of Chapin Hill Advisors in New York. "They think things are going to get better, that the Fed will step in and that things are turning around. But I think regular people are feeling really insecure. There's such a disconnect going on."
Indeed, even as the market roared through July, the safety trade remained intact as investors continued to worry about deflation.
Treasury yields held firm through the month, though under normal circumstances yields would rise as stocks surge higher. Investors dump safe-haven investments like bonds during good times, forcing yields higher as an enticement to buy.
The government debt market surged again Friday, with the two-year yield briefly dipping below 0.50 percent as part of a continuing series of record lows, while the benchmark 10-year note yield approached 2.80 percent, which it hasn't touched since April 14, 2009.
And that could be another thing that would lift stocks: Treasury yields could go so low that investors would tire of the low returns and turn to the equity markets.
"There's a lot of uncertainty and concern about the job market and the economy and that's fueling Treasurys," says Kim Rupert, managing director of fixed income analysis for Action Economics in San Francisco. Yet, she adds, "I'd be hard-pressed to be a buyer....They're looking pretty rich to me."
Rupert says further analysis could show the jobs outlook to be not as dire as it seems, and that too would drive people out of the government debt markets.
And a clear move from investors out of Treasurys could serve as the all-clear sentiment signal to bring equity investors off the sidelines.
"If we can get above 3 percent on the 10-year and stay above 3 percent, you could see a very unexpected tactical shift in asset allocation where people would start selling bonds and moving into stocks," says Rick Bensignor, chief market strategist at Execution Noble in New York. "It's not a one-day event. But if you can get above 3 and hold 3 percent you might see people saying it's time to take money out of the bond markets, and stocks might be a recipient."
Technical levels would play an important role as well.
Such considerations always weigh into market moves, but with the volume so light this summer the support and resistance of various levels along the way has been a major influence.